Blog

Jeff Sachs has long been known as the celebrity-hobnobbing economist with the seriously flawed “shock therapy” plan for economic development. Lately he’s taken a weird turn in the public debate, coauthoring an op-ed piece with Joe Scarborough of all people, attacking Paul Krugman.

Today he’s back with one of the most bizarre pieces of economic analysis I’ve seen, arguing among other things that 1) the stimulus was too focused on short-term stuff like tax cuts which 2) aren’t effective stimulus anyway (huh?) and 3) should have had much more long-term investment. Listen to him complain about the last one:

Examples of long-term federal investment programs include the national highway system, the moon program, and the human genome project. A massive renewable energy program - R&D, renewable power generation, new transmission grid, urban smart grids, and related infrastructure (e.g. for electric vehicles) - is an example of what is needed over the course of a decade. It might have been feasible in 2009 when Obama had the upper hand and the momentum. It is, alas, very unlikely today.

The Administration should indeed have taken several months in 2009 to design and advocate for long-term investment programs for renewable energy, fast intercity rail, large-scale highway upgrading, large-scale skill and job training, and so forth, rather than rushing to pass a stimulus package of hundreds of billions of dollars of shortsighted and largely ineffective temporary tax cuts and transfer programs.

Nutty aggregate demand issues aside, this is simply ignoring the plain facts. The stimulus did have money for renewable energy ($90 billion in fact), upgrading our rail network, and highway maintenance. A book has been written about this very topic, large sections of which is devoted to lamenting the fact that lazy, irresponsible pundits and reporters then and now keep complaining that the stimulus didn’t have things it in fact had.

Peggy Noonan got hammered for complaining Obama hadn’t done infrastructure spending he had in fact done, but no one was surprised because it’s Peggy Noonan and she’s basically your crazy aunt. But Jeff Sachs is supposed to be a professional economist. He may have laid waste to Russia, but I would have thought he could at least bother to read a summary of such a huge bill before holding forth.

Feed the Political Animal

Comments

majun on March 10, 2013 11:21 AM:

Sachs is probably right that there was too much spending on tax cuts in the stimulus bill, as opposed to spending on infrastructure. But the more appropriate question is, who is really to blame for that. And the answer is, mostly it is Olympia Snowe. Several hundred billion dollars of investment was redirected into tax cuts in order to buy her vote. Because tax cuts are the only thing that Republicans will believe can stimulate the economy. And Snowe is, as always, a Republican first.

c u n d gulag on March 10, 2013 11:28 AM:

Dear Mr. Sachs(of burning dog-poop on your porch),

Perhaps you were watching FUX Noise while Krugman, and other economists who've been right all along, said the stimulus needed to be at least twice what finally got through Congress.

Frankly, what was passed was pretty much a miracle in its own right, what with the Congress full of the people who spent over 30 years trying to destroy the middle class in America.

And to today's TeaBirchers, 'stimulus' is a 4-letter word.

So, the fault lies not in our President, Jeff, my dear boy - but in the hosts and guest stars of Sunday cable and network bloviation fests.

Oh, and what does "co-authoring" mean, when Cup O' Schmoe's involved?

You get to sharpen his crayons?

Joe Friday on March 10, 2013 12:29 PM:

Well, first off, when it comes to all things economic, Scarborough is an idiot. As we used to say, he doesn't even know, that he doesn't even know, what he doesn't even know.

Secondly, what the hell has happened to Sachs ?

The stimulus worked like a charm, as far as it went. Many people, myself included, were screaming at the time it was way too small. Nevertheless:

* Before the stimulus bill was enacted in early '09, the GDP in the 4TH QTR of '08 was a NEGATIVE 8.9% as Chimpy Bush jumped with his golden parachute.

* That's a swing of more than 12% GDP from negative to positive in less than 12 months.

* The almost 850,000 a month job losses at the end the Chimpy Bush administration prior to the stimulus, was replaced by an average of almost 200,000 a month job gains. That's a reversal approaching a MILLION jobs a month.

It stopped the crash and reversed it. It just wasn't large enough to do the rest of the lifting.

Third, I will give Sachs one MINOR point. The stimulus did have too many tax cuts and they are NOT stimulative.

Obama kept adding tax cuts trying to get Republicans to vote for the stimulus, and they wouldn't vote for it anyway. However, this is a political issue of Obama repeatedly attempting to be bipartisan and repeatedly getting burned. One would have thought he would have learned his lesson on this, but given the current budget negotiations, apparently not.

There are other sources indicating even worse outcomes, but here is a "Bang For The Buck" chart from Mark Zandi, McCain's former economic advisor, showing tax cuts are simply not stimulative:

All of these complaints about Sachs's column completely miss the points. First, Sachs's main objective was to simply point at Obama and his stimulus while making funny faces.

But most important, from Sachs's perspective, was the planting of disinformation in the public forum. The "facts" in this column will now be picked up and repeated endlessly as proof that Obama's economic policies are terrible. None of what Sachs wrote is true, but that's kinda the point.

Decatur Dem on March 10, 2013 1:03 PM:

"Peggy Noonan got hammered..." Heh.
Is it Charles Pierce who calls her "Our Lady of the Perpetual Happy Hour"?

Robert Goodman on March 10, 2013 8:30 PM:

Dr. Sachs is a very busy man who does not have the time to read everything that his more first-world committed colleagues write. But he has apparently decided that he knows what they've written and said nonetheless. This is because Dr. Sachs is a world historical figure who enjoys the perspective afforded those who have a perch on Mount Olympus whenever he closes his eyes and visualizes himself.

You will note that his highly refined post-Keyenesian solutions (build infrastructure, improve education and tax more) are what every Keynesian crude or highly polished, would recommend. Alas with scant hope of realization in the country he actually inhabits. AT least not as much as one might wish.

Certainly Joseph Stiglitz who is his terrestrial neighbor and Paul Krugman who has a foothold in his neighborhood have argued more insistently and more publicly for these very interventions. But, then, they are mere mortals who are bound by scruples to be truthful in what they wrote and say.

He, on the other hand, has embarked on a project to save the world. We who are citizens of this nation should wish him well and cut the great man some slack.

jkl; on March 10, 2013 8:55 PM:

Dr. Sachs' perch is on the Mt. Olympus known as the Morning Joe Show.
Joe Scarborough used to yell at Jeffrey Sachs for not agreeing with him, and once upon a time Dr. Sachs made more sense. Like most of the Morning Joke cultists, he learned to adjust, agree with Joe, accept Mika's eye rolling, Willy's silence, Halperin's fence-sitting, Barnicle's slouch---and the cushy gig continues for all of them.
Dr. Krugman clearly won the debate with Joe on PBS. Joe, of course, arrived with crib notes prepared for him to distort Paul's old quotes, but he looked ever the bully, the playground monster trying to dropkick the academic. Last I heard Joe wasn't offered a Nobel Laureate in anything.

Robert Goodman on March 10, 2013 9:17 PM:

jkl: Didn't know that Sachs has a TV gig. I'm not a morning person. I don't know Mika and Willy but Halperin and Barnicle certainly haven't added much heft to any discussion I've heard in which they've had a voice.

fyzziks on March 10, 2013 10:12 PM:

JoeFriday: the Zandi chart doesn't show that tax cuts aren't stimulative, it just shows they aren't AS stimulative as infrastructure investments or unemployment insurance since they have smaller multipliers. A policy would have to have 0 or negative multiplier to be non-stimulative. In fact, Aandi's chart shows that payroll tax relief and job tax credits have multipliers greater than 1.

Your point is still true, that tax cuts are not the best way to stimulate the economy, and the stimulus we enacted, flawed and small as it was, did really start to pull us out of the hole.

Suddenly, it's in both parties' interests to fight the broader decline of marriage. Here's the case for a "marriage opportunity" agenda. By David Blankenhorn, William Galston, Jonathan Rauch, and Barbara Dafoe Whitehead